There was an
interesting article in the ST Forum today, where a call was made to adopt a
single private property index with data that is complete, transparent, accurate
and consistent. This is in view of the recent improvement announced for
the HDB resale price index.

The wife and I
agree with the views of the writer...to some extent. Yes, upgrading to a
condominium is the "Singapore
dream" of many Singaporeans. And yes, it is probably the most expensive item
purchased in their lives. As such, potential buyers should make the most informed
decisions before they put money on that private property. And there are definitely
data on private property transactions published and reported regularly (with
some available monthly) in Singapore.
But is it really a good thing to adopt a single "standard" index for the private
residential property market?

The wife and I
must admit that we are not absolutely familiar with the mechanics of the various indexes that were
mentioned in the article. But based on our limited understanding, there are notable
differences in terms of how each of the index is derived.

The Singapore
Residential Price Index (SRPI) complied by NUS, for example, is a transactions-based
index that tracks the month-on-month price movements of private non-landed
residential properties in Singapore.
The index published is in the form of value-weighted indexes. The SRX Property
Index (SPI), on the other hand, supposedly calculate
price changes that take into account unique Singaporean factors such as the
property's distance to a top primary school or an MRT station, in addition to standard
index factors like location, age of property, size, floor levels and land
tenure.

The
URA non-landed residential property price index (PPI) are complied on a
quarterly basis while the SRPI and SPI are derived monthly.

And
the SRPI certainly did not claim to be more accurate than the others - they have
stated in no unclear terms to being a complement to existing property information.

So
yes, there are quite a few indexes for prospective buyers to refer...
if they choose to. And yes, it can be confusing at times. But is it really a
bad thing?

The
wife and I believe that with more available sources, more in terms of
knowledge/understanding can be gained from the data provided. We cannot comment
on the conflicting price signals that the different indexes supposedly conveyed
during the period of 2008 till now, as we do not track these closely. But if
one index says that the private property market is up while another claims that
it is down, it does set us thinking about why this is so and prompt us to find out
the reason for such discrepancy. Having said that, we reckon that the indexes are likely
to point the same way in most cases, albeit not in similar degree. And if we
realize that most of the property indexes are generally pointing towards a
downward trend (as per what is happening now), we can safely assume that the
market is down and be guided accordingly.

But
what if one index said that the market is down 1% this month while another
calculated it to be 0.8%? The wife and I have never been too bothered by such
differences. The actual index numbers do not typically feature in our
calculation proper when we decide to buy - what the numbers mean (at least to
us) is that the more it is down, the higher the probability that we can
"press" the seller for a lower price. We deem it more important to
research on actual transacted prices (e.g. caveats lodged with URA) and what the
current asking prices are (e.g. adverts in property sites) to derive at our
"ideal" price.

One other point that we do agree with is that lodging of caveats with the Singapore
Land Authority should be made compulsory rather than voluntary. But with regard
to the so-called "inflated prices" due to stamp duty/cash rebates that are
offered by developers and not captured in the data, which in turn served as a
biased reference for valuation of similar properties and resulting in the risk
of buyers taking bigger housing loans and servicing mortgages that are higher
than the actual market values of their properties, the wife and I did an
off-the-envelope calculation and reckon that these "incentives" are
minuscule compared to the actual price of the property. So the question of how
big an "inflation effect" these will have on property valuation
remains.

While the wife and I can certainly appreciate the good intention of the writer,
we do not quite concur with her notion to adopt a single index for tracking
the private residential market. And besides, Singapore
is just one of many countries (USA,
UK...just
to name two) in the world where different organizations compile and distribute their own set
of private home market index. So instead of focusing on the negatives of having
different price indexes, we should all take better ownership over our decisions (not merely being spoon-fed) and do the necessary homework based on the diversity of data that's available
out there. This is especially if it concerns one of the most important
decisions in our lives...

But
given that the wife and I are no experts, the above are just our humble opinions. And we be more than happy to agree to disagree as
always...

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The wife and I are avid property watchers and self confessed "show-flat fanatics". SG Proptalk is our platform to share our thoughts and experiences on private residential property purchases and investments.

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